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L&T tumbles after revealing Dubai exposure

Capital Market / 10:54 , Nov 27, 2009

Larsen & Toubro fell 4.03% to Rs 1564.95 at 10:54 IST after a senior company official told the media that the company's exposure to Dubai is in the range of $20 million to $25 million.

Meanwhile, the BSE Sensex was down 366.06 points, or 2.17%, to 16488.87.

On BSE, 2.23 lakh shares were traded in the counter as against an average daily volume of 4.45 lakh shares in the past one quarter.

The stock hit a high of Rs 1600 and a low of Rs 1530 so far during the day. The stock had hit a 52-week high of Rs 1800 on 8 June 2009 and a 52-week low of Rs 557 on 9 March 2009.

The stock had outperformed the market over the past one month till 26 November 2009, rising 3.24% as compared to the Sensex's 0.68% rise. It outperformed the market in past one quarter, gaining 3.52% as against 6.88% increase in the Sensex.

India's largest engineering company by revenue has an equity capital of Rs 120.05 crore. Face value per share is Rs 2.

The current price of Rs 1564.95 discounts the company's Q2 September 2009 annualised EPS of Rs 39.51, by a PE multiple of 39.60.

Larsen & Toubro (L&T)'s executive vice president, Shankar Raman, was quoted by the media as saying that the company's exposure is somewhere between $20 million to $25 million in terms of several retention amounts which are due, which if things go from bad to worse can become suspect receivables.

Dubai's financial health came under scrutiny after a major government-owned investment company on Wednesday, 25 November 2009, asked for a six-month delay on repaying its debts. Dubai World, which has total debts of $59 billion, is asking creditors if it can postpone its forthcoming payments until May next year. Dubai World has also appointed global accountancy group Deloitte to help with its financial restructuring. The company has been hit hard by the global credit crunch and recession. It was due to repay $3.5 billion of its debts next month.

The request for a delay in repayments led to major credit ratings agencies downgrading a number of state-backed companies. Following six years of rapid growth, the Dubai economy has slumped since the second half of 2008. The Dubai government said in a statement that the request to delay debt repayments also applied to property developer Nakheel, a Dubai World subsidiary.

On 13 November 2009, L&T sold 2.72 crore shares in Mahindra Satyam in two bulk deals at an average price of Rs 113.65 on the BSE. L&T made a profit of Rs 86.14 crore by paring a third of its stake in software firm Mahindra Satyam.

Prior to the deal, L&T held a 6.9% stake or 8.11 crore shares in the Hyderabad-based software exporter which it had acquired in two tranches at an average price of Rs 82 a share. L&T also made an abortive bid to acquire the company. However in April 2009 Tech Mahindra, part of the Mahindra group, acquired a controlling stake in the scam-tainted company, and renamed it Mahindra Satyam.

On 9 November 2009, L&T won an order worth Rs 1635.30 crore from the Madhya Pradesh Power Generation Company for building a 1,200 megawatts thermal power plant in central India. Earlier this month L&T also bagged an order worth Rs 6897 crore from the Maharashtra State Power Generation Company for building 1980 megawatts boiler turbine generator units.

On 9 October 2009, L&T said it had raised Rs 1872.79 crore through issuing 1.12 crore equity shares at Rs 1659.30 per share. On the same day, the company also launched an offering of foreign currency convertible bonds (FCCBs) for an aggregate amount of up to $200 million.

L&T's net profit rose 26.10% to Rs 580.40 crore on 3.54% rise in total income to Rs 8136.39 crore in Q2 September 2009 over Q2 September 2008.

L&T attributed the muted sales growth to delay in clearances of infrastructure projects from some clients and lower offtake of industrial and machinery products. The company said order backlog is at Rs 81,623 crore, which is 2.4 times its revenue of Rs 33,926.37 crore in the year ended March 2009, giving strong revenue visibility.

The company is India's biggest engineering & construction firm in terms of revenue.

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